Allstate Corporation (The)

Good day, and thank you for standing by. Welcome to Allstate's fourth quarter earnings conference call. Currently, all participants are in a listen-only mode. After prepared remarks, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. Please limit your inquiry to one question and one follow-up. As a reminder, please be aware this call is being recorded. And now I'd like to introduce your host for today's program, Brent Vander Mews, Head of Investor Relations. Please go ahead, sir.

Thank you, Jonathan. Good morning and welcome to Allstate's fourth quarter 2023 earnings conference call. After prepared remarks, we will have a question and answer session. Yesterday, following the close of market, we issued our news release and investor supplement and posted related material on our website at allstateinvestors.com. Our management team is here to provide perspective on these results and our strategy. As noted on the first slide of the presentation, our discussion will contain non-GAAP measures for which there are reconciliations in the news release and investor supplement, and forward-looking statements about Allstate's operations. Allstate's results may differ materially from these statements, so please refer to our 10-K for 2022 and other public documents for information on potential risks. And now I'll turn it over to Tom.

Good morning. We appreciate you taking the time and spending your time your effort to explore why Allstate's an attractive investment. So I'll begin with an overview of our strategy and results, and Mario and Jess are gonna go through the operating performance. Then we'll have time for your questions at the end. Let's begin on slide two, which depicts Allstate's strategy to increase shareholder value. So we have two components to the strategy, increase personal property liability market share, and expand protection provided to customers, which are shown in the two ovals on the left. On the right-hand side, you can see the highlights for the fourth quarter. We generated net income of $1.5 billion. The strong results reflect our actions to improve auto insurance profitability in mild weather conditions, which was a welcome reprieve from the elevated level of weather-related losses in the first three quarters of the year. The proactive approach to increasing bond duration also contributed to strong results with higher income for the market-based portfolio. To further increase shareholder value this year, we remain focused on improving auto insurance profitability. There is more work to be done, but we're well on our way. Additional shareholder value will then be increased by increasing policies enforced across all of our businesses. The transformative growth initiative to drive property liability market share growth can be implemented in more states this year now as auto margins have been improved. We're also focusing on expanding protection offerings to protection services businesses, which is shown in the lower oval. That's protection plans, identity protection, roadside, and they already all have good growth prospects. As you know, we started the process to sell the health and benefits business, and that process is proceeding on schedule. Let's review the financial results on slide three. Revenues of $14.8 billion in the fourth quarter increased by 8.7%. That reflects a 10.7% increase in the property liability earned premium, and that was due to rate increases in 2022, and mostly in 2022, and then 2023 in both the auto and homeowners insurance. Then investment income of the quarter was $604 million, an 8.4% increase, reflecting higher fixed income yields and duration extension, which is partially offset by lower performance-based income. The strong profitability in the quarter generated adjusted net income of $1.5 billion, or $5.82 per diluted share. Annual revenues of $57 billion were up $5.7 billion, or 11.1% over the prior year. Strong fourth quarter earnings resulted in positive adjusted net income for the year. Slide four summarizes the status of the four-part auto insurance profit improvement plan. Strong execution resulted in a 6.7% point improvement in the combined ratio in 2023. Starting with rates, since 2022, the Allstate brand implemented rate increases of 33.3%, which included 16.4% in 2023, and 6.9% in the fourth quarter, driven by the recent approvals in California, New York, and New Jersey. National General implemented rate increases of 10% in 2022 and an additional 12.8% in 2023. Looking forward, we will pursue rate increases in 10 states to improve margins and in other states to keep pace with increases in loss costs. Expense reductions were initiated in 2019 as part of the Transformative Growth Plan to become a low-cost provider of protection. Being early in this effort helped offset the rapid inflation and loss costs. The underwriting expense ratio decreased 1.1 points in 2023 compared to the prior year when you exclude the large decline in advertising that was directly linked to lower profitability. Looking forward, further cost reductions will improve efficiencies and our competitive price position. Given the significant improvement in prospective auto margins, we'll increase advertising investment this year. In addition, we implemented underwriting actions to restrict new business where we were not achieving target returns. We're removing some underwriting restrictions as rate adequacy is achieved. Finally, enhancing claim practices in a high inflation and increasing litigious environment are required to deliver good customer value. This includes accelerating the settlement of injury claims and increasing in-person inspections. This program has positioned us to increase new business levels and begin to grow policies and enforcement states where acceptable margins have been restored. Now I'll turn it over to Mario to discuss property liability. Thanks, Tom.